Japanese Yen and Aussie Dollar Forecasts: Inflation, Wages Drive Policy Bets

Japan Producer Prices to Spotlight the BoJ and the Yen

Markets brace for a pivotal week as Japan’s producer prices guide expectations for the BoJ’s next move and USD/JPY’s near-term direction.

Japan’s producer price numbers influenced sentiment toward inflation and the BoJ rate path on Wednesday, August 13. Producer prices rose 2.6% year-on-year in July, softening from June’s 2.9% increase. Economists had expected producer prices to climb 2.5%.

A softer reading could indicate a cooler inflation outlook, potentially delaying a Bank of Japan rate hike. A less hawkish BoJ stance may weigh on the Yen. The USD/JPY pair briefly dropped from 147.783 to 147.755 before rising to 147.810 immediately after the release of the data.

Producer prices are crucial, given that economists view these as leading inflation indicators. Producers adjust prices based on demand, either passing cost savings on to consumers or raising costs.

East Asia Econ remarked on Japan’s latest Economic Watchers (EW) survey, stating:

“Japan – inflation concerns grow. Today’s EW survey suggests stabilization in sentiment following the sharp deterioration in Q1. As that happens and high-frequency price measures stop falling, officials, both on the BOJ MPC and in the wider government, are expressing more concern about the continued strength of inflation.”

USD/JPY Daily Outlook: Fed Chatter in Focus

Later in the session on Wednesday, reaction to Tuesday’s US CPI Report could influence sentiment toward the Fed rate path. The core inflation rate rose from 2.9% in June to 3.1% in July, while the annual inflation rate held steady at 2.7%.

Calls to delay Fed rate cuts to continue assessing the effect of tariffs on inflation could send USD/JPY bring the 200-day EMA into play. A sustained move through the 200-day EMA may pave the way to the 149.358 resistance level. Conversely, support for a September rate cut and further easing in Q4 may expose the 50-day EMA. If broken, the bears could target the crucial 145 support level.

USD/JPY: Key Scenarios to Watch

• Bearish USD/JPY Scenario: Hawkish BoJ guidance or dovish Fed cues could send USD/JPY toward the 50-day EMA, potentially testing the 145 support level.
• Bullish USD/JPY Scenario: Dovish BoJ rhetoric or hawkish Fed signals may send the pair toward the 200-day EMA and potentially the 149.358 resistance level.

See today’s full USD/JPY forecast with chart setups and trade ideas.

AUD/USD: Aussie Wage Growth in the Spotlight

Turning to the AUD/USD pair, Australian wage growth figures will influence the RBA rate path and demand for the Aussie dollar. Economists forecast the Wage Price Index to rise 3.3% year-on-year in the second quarter, easing from the first quarter’s 3.4% increase.

Softer wage growth may affect consumer spending, potentially dampening demand-driven inflation. Cooling inflation may raise expectations of a Q4 RBA rate cut. On the other hand, a higher wage growth reading could boost consumer spending, tempering bets on further RBA policy easing.

During Tuesday’s RBA press conference, Governor Michele Bullock signaled a data-dependent policy stance. Governor Bullock also emphasized the RBA’s focus on labor market and inflation data, giving wage growth trends a greater influence on AUD/USD trends.

AUD/USD: Key Scenarios to Watch

• Bearish AUD/USD Scenario: Weaker Aussie wage growth or dovish RBA rhetoric. These factors could drag AUD/USD toward the 50-day EMA, potentially exposing the 200-day EMA.
• Bullish AUD/USD Scenario: Rising Aussie wages or hawkish RBA cues. These factors could drive AUD/USD toward the crucial $0.6550 resistance level.

Explore our full AUD/USD analysis, including key trends and trade data, here.

AUD/USD Daily Outlook: Fed Chatter and Rate Differentials

Later today, Fed commentary could influence expectations of multiple Fed rate cuts and affect US-Australian interest rate differentials.

Hawkish Fed signals, following a sharper-than-expected pickup in core inflation, could widen the US-Aussie rate differential in the US dollar’s favor. The AUD/USD pair could drop toward the 50-day EMA on fading bets on multiple Fed rate cuts.

On the other hand, dovish Fed rhetoric could drive the pair toward the $0.6550 level. A break above $0.6550 may pave the way toward the crucial $0.66 resistance level.

Key Market Drivers to Watch Today:

• USD/JPY: Japan producer prices and BoJ policy signals.
• USD/JPY and AUD/USD: Fed commentary.
• AUD/USD: Aussie labor market data and RBA cues.

For more in-depth analysis, review today’s USD/JPY and AUD/USD trading setups in our latest reports and consult our economic calendar.